Question :
11) In order to raise the federal funds rate, the : 1238255
11) In order to raise the federal funds rate, the Fed ________ government securities in open market operations, so that banks’ reserves ________ and the quantity of money ________.
A) buys; decrease; increases
B) sells; decrease; decreases
C) sells; increase; decreases
D) buys; increase; increases
E) buys; increase; decreases
12) In order to lower the federal funds rate, the Fed ________ government securities in open market operations, so that banks’ reserves ________ and the quantity of money ________.
A) buys; decrease; increases
B) sells; decrease; decreases
C) sells; increase; decreases
D) buys; increase; increases
E) buys; decrease; decreases
13) When the Fed sells government securities, banks’ reserves ________, the quantity of money ________, and the federal funds rate ________.
A) increase; increases; falls
B) decrease; decreases; rises
C) increase; decreases; rises
D) decrease; increases; falls
E) decrease; decreases; falls
14) When the Fed buys government securities, banks’ reserves ________, the quantity of money ________, and the federal funds rate ________.
A) increase; increases; falls
B) decrease; decreases; rises
C) increase; decreases; rises
D) decrease; increases; falls
E) increase; increases; rises
15) The figure above shows the market for bank reserves in Futureland. If the Bank of Futureland undertakes an open market purchase of government securities that changes the quantity of reserves by $25 billion, then the federal funds rate will
A) rise to 8 percent a year.
B) remain at 6 percent a year.
C) fall to 4 percent a year.
D) change, but more information is needed to determine by how much.
E) None of the above answers is correct.
16) The figure above shows the market for bank reserves in Futureland. If the Bank of Futureland undertakes an open market sale of government securities that changes the quantity of reserves by $25 billion, then the federal funds rate will
A) rise to 6 percent a year.
B) remain at 4 percent a year.
C) fall to 4 percent a year.
D) change, but more information is needed to determine by how much.
E) None of the above answers is correct.
17) The figure above shows the market for bank reserves in Futureland. If the Bank of Futureland lowers the target federal funds rate by 1 percentage point, the central bank will conduct an open market ________ of government securities of ________ to ________ the supply of reserves.
A) sale; $75 billion; decrease
B) purchase; $25 billion; decrease
C) sale; $25 billion; increase
D) purchase; $75 billion; increase
E) purchase; $25 billion; increase
18) If the Fed sells government securities, in the short run the nominal interest rate ________ and the real interest rate ________.
A) rises; rises
B) does not change; rises
C) falls; falls
D) rises; does not change
E) rises; falls
19) The Fed ________ influence the real interest rate in the short run and ________ influence the real interest rate in the long run.
A) can; can
B) can; cannot
C) cannot; can
D) cannot; cannot
E) might be able to; might be able to
20) A hike in the federal funds rate results in ________ in the real interest rate which leads to a ________ in investment.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
E) a decrease; no change
